Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF JUSTICE

OF THE STATE OF MONTANA

In the matter of the adoption of NEW RULE I concerning associated gambling business license, NEW RULE II concerning approval of variations of standard bingo cards, and the amendment of ARM 23.16.202, 23.16.401,23.16.1245, 23.16.1716, 23.16.1914, 23.16.1915, 23.16.1916, 23.16.1916A, 23.16.2001, and 23.16.2602, concerning credit play, card dealer licenses, card room contractors license requirements, sports tab game seller license, distributor licenses, route operator licenses, manufacturer licenses, accounting system vendor licenses, manufacturer of illegal gambling devices license, and raffle record keeping requirements

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NOTICE OF PUBLIC HEARING

ON PROPOSED ADOPTION

AND AMENDMENT

TO: All Concerned Persons

1. On July 2, 2009, at 9:00 a.m., the Montana Department of Justice will hold a public hearing in the conference room at the Gambling Control Division, 2550 Prospect Avenue, Helena, Montana, to consider the proposed adoption and amendment of the above-stated rules.

2. The Department of Justice will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, contact the department no later than 5:00 p.m. on June 29, 2009, to advise us of the nature of the accommodation that you need. Please contact Rick Ask, Gambling Control Division, 2550 Prospect Avenue, P.O. Box 201424, Helena, MT 59620-1424; telephone (406) 444-1971; Fax (406) 444-9157; Montana Relay Service 711; or e-mail rask@mt.gov.

3. The proposed new rules provide as follows:

NEW RULE I ASSOCIATED GAMBLING BUSINESS LICENSE (1) Except where licensure is required by Title 23, chapter 5, MCA, or under these rules, an associated gambling business license is a license the department may issue to a person or entity whose business provides products or services to a licensed gambling business and:

(a) possesses or maintains control over gambling equipment or devices;

(b) has access to gambling related trade secrets, or proprietary, confidential, or tax information; or

(2) An applicant for an associated gambling business license must submit to the department:

(a) an application using Form 17, with special instructions, and Form FD-258, which are available from the Gambling Control Division, 2550 Prospect Ave., P.O. Box 201424, Helena, MT 59620-1424;

(b) Form 10 for all applicants as described in ARM 23.16.102;

(c) a complete set of fingerprints, on Form FD-258 provided by the department, obtained and certified by a local law enforcement agency, the department, or a private security company approved by the department, for each person required to complete a personal history statement;

(d) financial statements for the applicant's business as described in ARM 23.16.502; and

(e) a check or money order for $1,100 made payable to the State Treasurer, which includes payment for the:

(i) $100 annual license fee; and

(ii) $1,000 processing fee to cover the actual cost of processing the license.

(3) Based on the actual cost incurred by the department in determining whether the applicant qualifies for licensure, the department will refund any overpayment of the processing fee or collect an amount sufficient to reimburse the department for any underpayment of actual costs. If an applicant withdraws the application after the department has begun processing the application, the department will refund any amount not expended as of the date of withdrawal.

(4) The department may waive the application and processing fee if the applicant is licensed as an operator, distributor, manufacturer of legal or illegal devices, or a route operator, and if the applicant is substantially the same and has not added strangers to the license.

(5) The provisions of this rule do not apply to attorneys or accountants who are retained by licensees in their professional capacity and may have access to gambling related trade secrets, or proprietary, confidential, or tax information.

AUTH: 23-5-178, 23-5-115, MCA

IMP: 23-5-178, MCA

RATIONALE AND JUSTIFICATION: The 2009 Legislature enacted SB 86, which in part amends 23-5-112, MCA to define "associated gambling business," and enacts new Section 8 (23-5-178, MCA) which grants the department the authority to adopt rules for licensing associated gambling businesses. This proposed new rule sets out the criteria for the issuance of an associated business license, and it establishes the application and licensing procedures required by the department for a person to obtain an associated business license. These procedures are borrowed in large part from the procedures and language previously adopted in ARM 23.16.1916A for the licensing of video gambling machine accounting and reporting system vendors.

This rule is necessary to provide a means for associated gaming businesses to obtain a license from the department. The rule makes clear that not all associated gambling business licenses are compulsory licenses. Unless the associated business license is mandated by statute or rule, the license may be granted when it is requested from an applicant. An example of a compulsory associated business license is the accounting system vendor license provided for in ARM 23.16.1916A, which specifies that licensure is required before the person or entity may conduct business in the state. In other cases, the department may be asked to issue a license to a business that provides goods or services to gambling businesses where no license is required by the department. A business may request the associated business license because it demonstrates to its customers or clients that it has undergone the department's background check and its product is not illegal. As an example, a business that salvages video gambling machine parts sought licensure from the department because such licensure was required by the regulatory authority in the state where the machines were to be dismantled.

Section 5 of this rule is needed to make clear that the department will not require licensure of accountants or attorneys who perform professional services for gambling businesses.

NEW RULE II PROCEDURE FOR APPROVING VARIATIONS OF STANDARD BINGO CARDS (1) A game of bingo using a variation of a standard card with 5 columns and 25 squares may not be conducted unless and until it has been approved by the department.

(2) A person requesting approval from the department for conducting a variation of an authorized bingo card shall submit the following information to the department:

(a) an illustration or facsimile of the proposed bingo card variation submitted for approval; and

(b) a detailed description of the operation of the game of bingo utilizing the proposed bingo card variation, which must verify that the game complies with all requirements for games of bingo as set out in 23-5-412, MCA.

(3) The department may request additional information, including a demonstration of the game of bingo utilizing the bingo card variation submitted for approval.

(4) After reviewing the proposed bingo card variation, the department shall notify in writing the person submitting the variation of its intended action. If the person desires a hearing he shall submit a written request to the department within 20 days. Upon receipt of the request, all proceedings must be conducted according to the Montana Administrative Procedure Act and the Attorney General's Model Rules of Procedure.

AUTH: 23-5-115, MCA

IMP: 23-5-412, MCA

RATIONALE AND JUSTIFICATION: The 2009 Legislature's amendment to 23-5-412, MCA gives the department authority to approve proposed variations from the standard bingo card. This new rule employs language and procedures similar to those established in ARM 23.16.1202 for department approval of proposed variations of card games. This rule is necessary to describe the department's procedure for approving standard bingo card variations.

Pursuant to this rule, a person may submit bingo cards to the department which vary from the standard bingo card. The submission must include a visual depiction of the proposed bingo card, along with a description of how the bingo card will be played in compliance with the law. If the department is not able to approve the proposed bingo card variation based upon the information provided, it may request additional information, including a demonstration of how the game will be played. In the event the department denies approval for the bingo card variation, the person who submitted the variation may request an administrative hearing to contest the determination.

4. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

23.16.202 CREDIT PLAY PROHIBITED (1) remains the same.

(2) No operator may grant a loan of any kind at any time to a player or permit a deferred payment including post-dated checks or engage in any similar practice. A check or debit card used to obtain cash on the premises of a licensed operator must be delivered and accepted unconditionally. An operator may not accept or hold a check, credit card, or debit card pending the outcome of a gambling activity. An operator may not accept cash from the person who wrote the check to repurchase a check previously cashed on the premises, unless the cash is tendered by noon on the day following the date written on the check.

(a) remains the same.

(3) Any debt resulting from a credit card transaction to obtain cash for the purpose of gambling may not become a debt owed to the licensee, be assigned to the licensee, or be assigned or sold to a collection agency acting on behalf of a licensee. Debt resulting from a credit card transaction to obtain cash for the purpose of gambling may only become debt owed to the financial institution issuing the credit card. A licensee may accept debit cards to provide cash to customers for gambling purposes. The customer must present the debit card and the cardholder must enter a PIN number.

(4) No licensee may accept credit cards for cash advances for the purpose of gambling by representing the transaction as a sale of merchandise, gift cards, or in any other way that would violate the rules or agreements with the issuing merchant bank or credit card company. Any attempt by a licensee to collect credit card charges from a cardholder made in violation of credit card rules or regulations will constitute a violation of the public policy against credit gambling. No licensee may accept credit cards for cash advances or the sale of items that may be redeemed for cash, such as gambling chips, money orders, checks, e-checks, vouchers, travelers checks, wire transfers, or gift cards.

(5) Any merchandise or services purchased from a licensee with a credit card may be refunded or reimbursed through an adjustment to the customer's credit card account, and not by a cash refund.

(5) remains the same but is renumbered (6).

AUTH: 23-5-115, MCA

IMP: 23-5-115, 23-5-157, MCA

RATIONALE AND JUSTIFICATION: The 2009 Legislature enacted SB 86, which in part amends 23-5-157, MCA, the statute which requires gambling on a cash basis and prohibits credit gambling. The amendment effectively prohibits a person from using a credit card to obtain cash for gambling purposes, but it specifically allows a person to use a debit card to obtain cash for gambling purposes.

Because credit cards may no longer be used for gambling purposes, this rule amendment is necessary to repeal the administrative regulations and restrictions related to the use of credit cards for gambling purposes.

While the amendments recognize gambling patrons may use debit cards to obtain cash for gambling purposes, the rule requires that the card owner physically present the debit card and use a PIN number for all such transactions. This rule amendment is designed to prevent the use of stolen or fraudulently obtained debit cards.

The rule amendments also recognize patrons of gambling establishments may lawfully use credit cards for purposes other than gambling. These rule amendments prohibit gambling establishments from charging merchandise to a credit card which can be redeemed for cash, such as money orders, e-checks, or gift cards. The amendments also require that any refunds from a credit card transaction may not be made in the form of cash to the customer, but must be through a reversal of the charge, or a credit to the cardholder's account.

23.16.401 APPLICATION FOR DEALER LICENSE (1) through (3) remain the same.

AUTH: 23-5-115, MCA

IMP: ~~16-4-414~~, 23-5-308, MCA

RATIONALE AND JUSTIFICATION: A recent FBI audit opined the department did not have clear legislative authority to conduct fingerprint background checks for card dealer license applicants. The 2009 Legislature amended 23-5-115, MCA to give the department specific authority to require all gambling license applicants to submit fingerprints for the purpose of conducting fingerprint based background checks. This rule amendment is necessary to correctly identify the legislative authority for the department to require gambling license applicants to submit fingerprints for purposes of conducting background checks.

23.16.1245 CARD ROOM CONTRACTORS LICENSE (1) through (2)(g) remain the same.

(3) If a card room contractor ~~alters~~ proposes to amend an existing agreement or enter into additional agreements after obtaining a license, he the contractor shall submit to the department for approval a copy of each proposed amended or additional agreement ~~to the department within ten days after altering or signing the agreement~~.

(4) A card room contractor shall not operate a card room under an amended or additional agreement unless and until such proposed agreement is approved by the department. This restriction does not apply when a proposed amendment to a previously approved agreement only extends the time period of the agreement and makes no other changes.

(4) remains the same but is renumbered (5).

AUTH: 23-5-115, MCA

IMP: ~~16-4-414~~, 23-5-324, MCA

RATIONALE AND JUSTIFICATION: These rule amendments are necessary to clarify that licensed card room contractors (CRCs) must obtain prior department approval before operating a card room under the terms of a new or amended card room contactor agreement. Currently, some CRCs believed the existing rules require only notification to the department before operating under a new card room contractor agreement or an amendment to an existing card room contractor agreement. The department's practice has been to require approval before a CRC operates under new or amended CRC agreements, but it recognizes the current rules are ambiguous. These rule amendments make clear that CRCs must obtain approval before operating under new agreements or amendments to approved agreements. The rule recognizes, however, that CRCs often enter into amended agreements with licensed operators where the sole modification is an extension to the time period of the agreement. This rule clarifies that CRCs do not need prior department approval in order to operate under an amended agreement when the modification is solely an extension of the time period of the agreement.

A recent FBI audit opined the department did not have clear legislative authority to conduct fingerprint background checks for card dealer license applicants. The 2009 Legislature amended 23-5-115, MCA to give the department specific authority to require all gambling license applicants to submit fingerprints for the purpose of conducting fingerprint based background checks. This rule amendment is necessary to correctly identify the legislative authority for the department to require gambling license applicants to submit fingerprints for purposes of conducting background checks.

23.16.1716 SPORTS TAB GAME SELLER LICENSE (1) remains the same.

(2) Based on the actual cost incurred by the department in determining whether the applicant qualifies for licensure, the department shall refund any overpayment of the processing fee provided for in (1)(de)(ii) or collect an amount sufficient to reimburse the department for any underpayment of actual costs. If an applicant withdraws the application after the department has begun processing the application, the department shall refund any amount not expended as of the date of withdrawal.

(3) The department may waive the application license and processing fee provided in (1)(de)(i) and (1)(de)(ii) if the applicant is licensed as a manufacturer, distributor, or route operator and if the applicant is substantially the same and has no strangers to the license.

AUTH: 23-5-115, MCA

IMP: ~~16-4-414~~, 23-5-115, 23-5-502, 23-5-503, MCA

Other minor edits are necessary to reflect a change in rule numbering resulting from amendments made in 2005.

23.16.1914 DISTRIBUTOR'S LICENSE (1) remains the same.

(3) The department may waive the application license and processing fees provided for in (1)(de) if the applicant is licensed as a manufacturer, manufacturer of illegal devices, or route operator and if the applicant is substantially the same and has no strangers to the license.

AUTH: 23-5-115, MCA

IMP: ~~16-4-414~~, 23-5-115, 23-5-128, MCA

Other minor edits are necessary to reflect a change in rule numbering resulting from amendments made in 2005.

23.16.1915 ROUTE OPERATOR'S LICENSE (1) remains the same.

(3) The department may waive the application license and processing fee provided in (1)(de)(i) and (1)(de)(ii) if the applicant is licensed as a manufacturer, manufacturer of illegal devices, or distributor and if the applicant is substantially the same and has no strangers to the license.

AUTH: 23-5-115, MCA

IMP: ~~16-4-414~~, 23-5-115, 23-5-129, MCA

Other minor edits are necessary to reflect a change in rule numbering resulting from amendments made in 2005.

23.16.1916 MANUFACTURER'S LICENSE (1) through (3) remain the same.

AUTH: 23-5-115, MCA

IMP: ~~16-4-414~~, 23-5-115, 23-5-625, MCA

23.16.1916A ACCOUNTING SYSTEM VENDOR LICENSE (1) through (d) remain the same.

(e) a check or money order for ~~$1,500~~ $1,100 made payable to the State Treasurer, which includes payment for the:

(i) ~~$500~~ $100 annual license fee; and

(ii) through (3) remain the same.

AUTH: 23-5-115, 23-5-621, MCA

IMP: 23-5-110, 23-5-112, 23-5-637, MCA

RATIONALE AND JUSTIFICATION: The 2009 Legislature enacted SB 86, which in part amends 23-5-112, MCA to define "associated gambling business," and enacts new Section 8 (23-5-178, MCA), which grants the department the authority to adopt rules for licensing associated gambling businesses such as the accounting system vendor license, and establishes the fee for such licenses at $100 annually. This rule amendment is necessary to conform the license fee schedule for accounting system vendor licenses, a type of associated business license, to the license fee authorized in SB 86.

23.16.2001 MANUFACTURER OF ILLEGAL GAMBLING DEVICES - LICENSE - FEE - REPORTING REQUIREMENTS - INSPECTION OF RECORDS - REPORTS (1) through (9) remain the same.

AUTH: 23-5-115, 23-5-152, MCA

IMP: ~~16-4-414~~, 23-5-112, 23-5-115, 23-5-152, 23-5-611, 23-5-614, 23-5-621, 23-5-625,

23-5-631, MCA

23.16.2602 RAFFLE GENERAL REQUIREMENTS, AUTHORIZED RANDOM SELECTION PROCESSES, AND RECORD KEEPING REQUIREMENTS (1) through (b)(ii) remain the same.

(2) Any raffle conducted by a nonprofit organization, college, university, public school district as provided in 20-6-101 and 20-6-701, MCA, or nonpublic school as described in 20-5-102(2)(e), MCA, must be publicly identified as a charitable raffle.

(3) For each raffle conducted, the entity conducting the raffle shall maintain for a period of 12 months from the date of the raffle drawing, and provide to the department upon request:

(a) a record of the total proceeds collected;

(b) a detailed description of the prize(s) awarded;

(d) a record reflecting the source of the prize(s), including any money paid to purchase prizes;

(e) a record of any administrative costs paid with raffle proceeds;

(f) a description of how the raffle was publically identified as a charitable raffle, where applicable;

(g) the name and address of the person(s) awarded raffle prize(s); and

(h) a detailed record of the distribution of the charitable raffle proceeds, where applicable.

(4) All raffle terms, including the date of the raffle drawing, must be available to the public prior to the sale of any raffle tickets.

AUTH: 23-5-115, MCA

IMP: 23-5-112, 23-5-413, MCA

RATIONALE AND JUSTIFICATION: The 2009 Legislature enacted SB 86, which in part amends 23-5-413, MCA, the law regulating raffles. The amendments to this statute: (1) remove the provisions for county-issued raffle permits; (2) broaden the scope of groups or entities whose charitable raffles are exempt from the prize limits; (3) give the division clear authority to investigate raffle violations; and (4) delegate rulemaking authority to the department to address raffle record-keeping and game integrity. This rule amendment is necessary to describe how the department will regulate charitable raffles and what notice and records are required for charitable raffles.

The rule amendment requires the person or entity holding a raffle to maintain specific records for a period of twelve months from the date of the raffle drawing. The records required by the rule to be maintained are crafted to allow the department to determine compliance with the law after the raffle drawing has been held. It is anticipated that the twelve-month period for retention of records will be sufficient to allow the department to investigate violations of the law.

The groups exempt from the raffle limits are required by the rule to identify their raffle as charitable prior to the sale of raffle tickets, since under the statute all proceeds are to be used for charitable purposes and/or to purchase raffle prizes. The rule also requires charitable raffles to keep a record of how the raffle was publically identified as a charitable raffle, as well as a detail of how the raffle proceeds were distributed to the charitable cause(s).

The rule amendment also requires that the raffle terms be available to the public before raffle tickets may be sold.

5. Concerned persons may submit their data, views, or arguments either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to Rick Ask, Gambling Control Division, 2550 Prospect Avenue, P.O. Box 201424, Helena, MT 59620-1424; Fax (406) 444-9157; or e-mail rask@mt.gov, and must be received no later than July 9, 2009.

6. An electronic copy of this Notice of Proposed Amendment is available through the Department of Justice's web site at http://doj.mt.gov/resources/administrativerules.asp. The department strives to make the electronic copy of the Notice conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the Department of Justice works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

7. The Department of Justice maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request which includes the name and mailing address of the person to receive notices and specifies that the person wishes to receive notices of rules regarding the Crime Control Division, the Central Services Division, the Forensic Sciences Division, the Gambling Control Division, the Highway Patrol Division, the Law Enforcement Academy, the Division of Criminal Investigation, the Legal Services Division, the Consumer Protection Division, the Motor Vehicle Division, the Justice Information Systems Division, or any combination thereof. Such written request may be mailed or delivered to Rick Ask, 2550 Prospect Avenue, P.O. Box 201424, Helena, MT 59620-1424; Fax (406) 444-9157; or e-mail rask@mt.gov, or may be made by completing a request form at any rules hearing held by the Department of Justice. A copy of the interested persons request form may be printed from the Department of Justice's web site at http://www.doj.mt.gov/resources/forms/interestedperson.pdf, and mailed to the rule reviewer.

8. Cregg Coughlin, Assistant Attorney General, Gambling Control Division, has been designated to preside over and conduct the hearing.

9. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor was contacted on May 15, 2009, by e-mail and on May 19, 2009, at the Gaming Advisory Council meeting.

By: /s/ Steve Bullock /s/ J. Stuart Segrest

STEVE BULLOCK J. STUART SEGREST

Attorney General, Department of Justice Rule Reviewer

Certified to the Secretary of State June 1, 2009.